Blue-chips finish with broad decline

SBC, Boeing woes exacerbate selling on data, war fears

By

MichaelBaron

NEW YORK (CBS.MW) - The Dow industrials fell back below 8,000 Thursday as setbacks for components SBC and Boeing compounded selling pressure created by a slew of disappointing economic data and lingering concerns about war with Iraq.

Weakness in the Nasdaq, however, was limited by marginal strength in its leading technology components.

The blue-chip index pushed above 8,000 for the first time in roughly two weeks on Feb. 18, boosted by a two-day rally that book-marked the holiday weekend. But it has given up roughly half those gains, which analysts attributed to oversold conditions and an ease in war fears, in the past two sessions.

A mass exodus from SBC Communications hamstrung the Dow after the Federal Communications Commission voted against granting major regulatory relief to the Baby Bells by easing requirement to provide cheap network usage to competitors. The stock
SBC, -1.62%
fell almost 8 percent. See full story.

Meanwhile, Boeing tumbled after JP Morgan expressed concern that earnings estimates on the aircraft maker may need to come down to reflect the possibility of a liquidation of UAL. The stock
BA, -4.47%
which sank to a 52-week low of $28.20 earlier in the session, tumbled almost 5 percent. See full story.

Breadth was negative on the Big Board with decliners outpacing advancers, 1,708 to 1,506. But the Nasdaq saw gainers get the best of losers, 1,594 to 1,573. Volume totaled more than 1.16 billion shares on the New York Stock Exchange, and 1.32 billion shares on the Nasdaq.

Pru's Piskorowski sees looming war w/ Iraq as main obstacle

Brian Piskorowski, market analyst with Prudential Securities, said the data was "not a step in the right direction," but he believes "all roads still lead to Iraq" because the prospect of war stands in the way of investor confidence in any kind of economic or earnings recovery.

He suspects the market would rally, at least initially, in the event of progress on Iraq.

"Uncertainty about what the world post-Iraq will look like is just not allowing people to see across this valley," he said. "Everyone seems to be sitting on their hands." Hear full interview

Still, investors got a lot of bad economic news to digest before the opening bell. A larger-than-expected increase in initial jobless claims showed the labor market weakened in the past week, while higher energy prices have created the worst wholesale inflation in the past 13 years. The government also said the U.S. trade deficit widened to a record $44.2 billion in December.

Report says war with Iraq could begin in less than a month

U.S. military planners are looking at a mid-March starting date for a war against Iraq, according to an article published in Thursday's Washington Post

Thanks to diplomatic difficulties, the newspaper said that troops from many key infantry divisions were still stuck in the U.S., unsure of whether they will invade Iraq from Turkey in the north or some other point.

Turkish Foreign Minister Yasar Yakis said that a parliament vote on the matter is unlikely before early next week but the dispute over the size of an economic aid package for Turkey could be resolved within days. Turkey is reportedly looking for roughly $10 billion in aid.

For its part, the Bush administration said it wants a prompt response from Turkey, and that a new Iraq war resolution would be offered to the U.N. Security Council this week or next.

Jobless claims break psychological barrier

The rolling four-week average of first-time claims for state unemployment benefits rose by 4,750 to 394,750 in the week ending Feb. 15, the highest in six weeks and the third straight gain, the Labor Department aid.

In the most recent week, initial claims rose 21,000 to 402,000, the highest in seven weeks. It also marks only the second time the claims have broke the psychological barrier of 400,000 this year.

Ian Shepherdson, chief U.S. economist for High Frequency Economics, called the data 'disappointing," as the consensus expectation for initial claims was 390,000. He said at least half the increase is related to adverse seasonal factors, but added that recent trends have made it difficult to get a bead on the job market's direction.

"Other indicators, like the Challenger survey, do suggest that layoffs are still falling, but the claims numbers are more closely-watched and, for now, they are on the soft side," he said. "This might mean that productivity is accelerating again after the Q4 drop, but there is no way to know that at this stage."

Reduced auto incentives lift core inflation rate; trade gap widens

The producer price index jumped 1.6 percent in January, led by a 4.8 percent rise in energy costs and a 1.6 percent rise in food costs, the government said.

The core rate of inflation rose 0.9 percent, the biggest jump in about four years. Most of the gain in core inflation was due to the 3.5 percent increase in new car prices as purchase incentives were reduced.

The U.S. trade deficit widened further in December to a record $44.2 billion as exports of non-automotive capital goods, led by telecommunications equipment and civilian aircraft, came under pressure, the Commerce Department reported.

The December trade gap was wider than expected as a survey of analysts by CBS.MarketWatch.com had produced a consensus forecast of $39 billion deficit in December.

January leading economic indicators revised lower

Contrary to its initial report, the index of leading indicators actually fell 0.1 percent in January instead of being unchanged as previously stated, the Conference Board said Thursday.

The board said it made an error in calculating the impact of one of the indicators, vendor performance. In January, four of the 10 indicators were up, while six were negative. The revision does little to change the board's general view that the economy is poised to grow in the coming months.

Prices for April gold pushed up $3.40 to $353.40 an ounce in morning action. See full story.

The U.S. dollar slid 0.3 percent versus the Japanese yen to a three-week low 118.37, setting the stage for a sixth straight session of declines. Against the euro, the buck fell 0.7 percent at $1.0814.

Merrill goes to 'slightly positive' on chips

Before the opening bell Merrill Lynch changed its view on the semiconductor sector to "slightly positive" from "negative," saying that the firm feels valuation is reasonable and that inventory levels and capital spending are low enough to increase the industry's sensitivity to any improvement in demand.

Morgan Stanley made a similar move Wednesday, boosting its assessment of the chips to "attractive" from "in-line."

The Philadelphia Semiconductor index
SOX, -3.86%
rose 1.2 percent to close at 292.47.

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